Europe Outperforms, Sterling Falls, Peloton Pops

Equity benchmarks are set to finish higher on the day as traders have swooped in and snapped up relatively cheap stocks as the mood is a little more optimistic.

Europe

The new strain of Covid-19 that is in circulation in the UK is still a major concern but some of the fears have melted away today. The French government have signalled that they are looking to end the ban on UK freight entering the country and that has assisted sentiment. Yesterday’s headlines about the UK potentially being isolated have dropped off the radar and that has propped up British stocks. Broadly speaking, today’s upward move is a reversal of yesterday’s very negative session as banks, airlines, transport stocks and housebuilders are enjoying decent gains. IAG (LON:ICAG), the parent of BA and Aer Lingus, NatWest, Lloyds (LON:LLOY) and Barclays (LON:BARC) are some of the biggest gainers on the FTSE 100. The dialling down of the health crisis has pushed Ocado (LON:OCDO) into the red.

DFS Furniture (LON:DFSD) issued an upbeat trading statement. In the 24 weeks until mid-December gross sales increased by 19%. The group anticipates that full year profit before tax will be in the upper half of the guidance, subject to market conditions. DFS’s business has been partially impacted by the renewed health crisis as tighter restrictions have forced the closure of showrooms parts of England, Wales and The Netherlands. Some of the sales operations have been disrupted but manufacturing and deliveries are still being carried out in parts of England that under tough restrictions so it’s not all bad with respect to the current environment.

In October, Weir Group (LON:WEIR), announced that it is planning on selling its oil and gas division to Caterpillar (NYSE:CAT) for $405 million. The move would help free up cash for future investment opportunities and strengthen its balance sheet. This morning, Weir announced that the deal should complete in the first three months of 2021, as long as there are no regulatory issues.

Grafton Group is an Irish building materials supplier and it will buy Proline, which is leading distributor of architectural hardware that is based in Dublin. DIY activity has become very popular in 2020 on account of the lockdown and the property market has been strong since it reopened as the pent-up demand was released. Last month Grafton announced that it purchased StairBox – the timber stair specialist – for £44 million, so it is clearly bullish in its outlook.

Vodafone (LON:VOD) owns roughly 77% of Kable Deutschland and this morning it offered the group €2.1 billion for an additional 17.1% stake in the firm.

SSE (LON:SSE) plans to sell off its UK gas exploration assets to Viaro Energy for £120 million as it wants to focus on its renewable assets and core networks.

US

The major indices are showing modest losses despite the fact that US lawmakers voted in favour of the $900 billion coronavirus relief package and the $1.4 trillion government funding scheme. There has been a lot of talk about a stimulus package recently and it seems that the good news was already baked into US equities.

In the third quarter, the US economy grew by 33.4% and that was a slightly positive revision from 33.1% in the second reading. Let’s not forget that the economy shrank by 31.4% in the second quarter so the latest quarter’s growth is encouraging.

Peloton (NASDAQ:PTON) shares opened at a record high on the back of an acquisition story and broker upgrades. The company will acquire Precor for $420 million and traders have reacted well to the news at it will boost Peloton’s manufacturing capacity and market share. Keybanc, Telsey Advisory and Stifel have all lifted their price target for Peloton. Keybanc are the most bullish of the bunch as their price target is $185.

Apple (NASDAQ:AAPL) shares have hit a three month high on the back of a report that the company is pressing ahead with plans for self-driving car technology and it hopes to deliver the first batch in 2024.

Tesla (NASDAQ:TSLA) shares are still in focus as the stock was included in the S&P 500 yesterday.

FX

In the third quarter, the UK economy grew by 16%, and that was an improvement on the 15.5% flash reading. The British economy contracted by 19.8% in the second quarter so today’s news is welcomed that the economy is rebounding. Public sector net borrowing last month was £30.83 billion and that was a big increase on the £20.9 billion registered in October. England was locked down last month and the cost of the pandemic is weighing on public finances. That being said, traders are more concerned about the UK-EU trade talks and the isolation of the UK. The CMC GBP index is in the red as British-EU trade discussions haven’t progressed. Andy Haldane, the Bank of England’s chief economist, said the UK economy is still in a hole and that the hole is deep, but he is hoping there will be a rapid bounce in the wake of a vaccine rollout.

The German GfK consumer sentiment reading for December fell from -6.8 in November to -7.3 in December – it's the lowest reading in six months. In light of the extended lockdown in Germany, it is not surprising that consumer confidence has weakened. EUR/USD is in the red because of the move higher in the US dollar.

Commodities

Goldis in the red due to the positive move in the greenback. Yesterday, the metal saw a lot of volatility and at one point it hit a six week high. Gold is more subdued today and it had traded in a relatively small range.

WTI and Brent crude oil are down over 1% as sentiment in the energy market is weak because of fears for demand on account of renewed health worries. Oil was hammered yesterday as there was a broad sell off due to isolation fears surrounding the UK, and lingering concerns that other countries might be struggling with the new Covid-19 strain soon too.

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